Feature Report: China and Energy

2 items of content in this feature report

Going in depth

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Climate: China's New Responsibilities

China faces a challenge: drive further growth and raise the living standards of its 1,380 million inhabitants, while also containing its energy consumption, pollution and greenhouse gas emissions. As the world’s second-largest economy behind the United States, it has a responsibility to ensure the planet’s sustainable future. Given its historical influence, its methods will shape growth paths in many countries in the emerging world.

Photo taken in Beijing in March 2018, on a day of record pollution.
A road in Beijing in March 2018, engulfed in a cloud of smog. Urban pollution has prompted China to embark on a proactive energy transition. ©WANG ZHAO / AFP

Carbon Emissions

With coalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... accounting for more than 60% of its energy consumption, China contributes around 28% of global CO2See Carbon Dioxid emissions in absolute terms, the same as the United States and Europe combined. However, its per capita emission rate is an estimated 7.8 metric tons a year (versus 16.1 metric tons in the United States, 6.8 metric tons in Europe, 1.9 metric tons in India and 0.9 metric tons in sub-Saharan Africa). The global average is 4.9 metric tons.

28.9 million: The number of cars sold on China’s domestic market in 2017.

Chinese COemissions from fossil fuelFuel is any solid, liquid or gaseous substance or material that can be combined with an oxidant... combustion were stable between 2014 and 2017, when they began rising again following an upturn in industrial activity. This is because Chinese industry is highly dependent on coal and has struggled to convert to lower-carbon energy sources. The phenomenon is not unique to China. It has been observed across the world and particularly in Europe, where emissions often increase during cycles of improved economic performance. 

However, China is clearly determined to decarbonize its economy. It predicts that total CO2 emissions will peak “around 2030”, meaning that thereafter they will fall in absolute terms. It has set itself the objective of increasing the share of non-fossil energies (principally renewables) in its primary energyAll energy sources that have not undergone any conversion process and remain in their natural state.. mix to 20% by 2030, from 7.5% in 2016.

Several strategic reasons are spurring China to make these changes, but major difficulties are holding it back.

Incentives

Cutting pollution. The main incentive is the desire to “make the skies blue again”, to use the phrase employed by Chinese officials. Mass use of coal and weak environmental regulations have caused air, water and soil pollution to reach intolerable levels for the Chinese people. The rise of more environmentally demanding middle classes has created public pressure on the Chinese government to take action. In response, small coal mines have been closed and polluting powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... plants relocated away from cities. According to U.S. studies, the number of heavy pollution days in Beijing fell from 58 in 2013 to 23 in 2017 and fine particle concentration has dropped by an average of 32% since 2014.

Securing growth. To help its 1,380 million citizens – rich and poor – realize their aspirations for a better life, China must maintain high levels of economic growth. Between 2002 and 2012, gross domestic product (GDP) expanded at a rate of more than 9%, peaking at 14.2%. Growth slowed over the subsequent years, but bounced back in 2017 to 6.9%. In comparison, average growth in Europe in 2017 was 2.5%. China made strong commitments under the Paris AgreementOil contract under which the oil that is produced is shared between the state and the oil company... adopted in December 2015 and it must therefore initiate a comprehensive energy transition to ensure that its growth is not inhibited by climate imperatives. It pays close attention to its “carbon intensity”, which measures COemissions against GDP1.

Maintaining leadership. Along with former U.S. President Barack Obama, Chinese President Xi Jinping was one of the key advocates of the Paris Agreement, thereby acquiring a strong international image. He declared his ongoing commitment to the agreement following the decision by current U.S. President Donald Trump to distance the United States from the energy transition.

Obstacles to Overcome

Replacing coal. For China, the main difficulty – and a substantial one at that – is to develop energy sources capable of gradually replacing coal. In certain provinces, the Chinese authorities introduced measures prohibiting industrial and domestic coal use, recommending that businesses and homes switch to gas. However, gas and electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor... shortages caused by high demand and underdeveloped gas infrastructure have triggered such discontent that the Chinese authorities have had to reverse the bans. As a result of the shortages, gas prices have soared in certain provinces.

More effectively using renewable electricity. China has more or less the same problem as Germany: its largest wind farms are located in the north of the country, while demand is concentrated on the east and south coasts. However, its power transmission grid is still weak, meaning that some of the electricity that could be generated by new facilities is abandoned. In 2015, 15% of wind power and 9% of solar power was “lost” in this way2.

China emits as much CO2 as the United States and Europe combined.

 

Meeting car demand. In 2000, China accounted for about 1% of global new car sales. In 2017, 28.9 million vehicles were sold in the country, representing 30% of new registrations worldwide. The United States’ share fell from 35% to 20% over the same period and continues to decline today. Although the market appears to be slowing dramatically, petroleum product consumption has soared, increasing the country’s energy dependence.

China has bet on the development of electric vehicles. According to International Energy Agency (IEA)An independent, intergovernmental organization founded within the framework of the OECD... 3 scenarios, one car in four will be electric in China in 2040. However, projections in this field are always uncertain.

 

China Creates a National Carbon Market

China launched a national carbon market in December 2017, in a step that could give new impetus to the carbon pricing mechanism, which is considered key to the fight against global warming. See Planète Énergies Close-Up.

Europe was the first region in the world to introduce such a system, under which emissions caps are set for industrial sectors and an emissions trading system is established within them.

China had already opened seven provincial carbon markets, in four cities (Shenzhen, Shanghai, Beijing and Tinjin) and three provinces (Guangdong, Hubei and Chonqing). Other local markets have been developed in the United States (California in particular), Japan and New Zealand.

A national market was promised by the Chinese government. However, it only covers the rapidly expanding electricity sector, which is dominated by large state-owned companies. Coal accounts for 65% of China's electricity generation, which is responsible for almost half of the country's fossil fuel emissions. The new market does not cover other high-emission sectors such as steel, cement, chemicals and transportation. According to the Chinese authorities, the market will be expanded to these sectors at a later date.

The implementation of such "markets" is complex. Under the European Union Emissions Trading System (EU ETS), the price per metric ton of carbon has never risen to a sufficient level. The aim of the system is to encourage companies to opt for less carbon-intensive production methods, so that they are not penalized by the cost of emissions allowances.

 

 

Sources:

(1) According to the Chinese authorities, China cut its carbon intensity by 46% in 2017, compared with 2005. Its objective for 2030 is a reduction of 60% to 65% on the 2005 level.

(2) See study by the French Development Fund (AFD)

(3) See the IEA report